Understanding Business Taxes

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The Effects Of Poor Financial Data Bookkeeping And How Accountants Can Help

Posted on:
15 October 2017

Owning and operating your own business is an ideal situation for many people. It is the chance for them to be their own bosses and make their own success. However, a lot of people that start their own businesses fail miserably at one very important aspect: financial data bookkeeping. Here are just some of the effects of poor financial data bookkeeping, and how accountants can help.

Your Business is Heading for Bankruptcy

After a few months or a year, you may be looking at your financial books and be freaking out. It may look as though you are going to have to file bankruptcy because you are so in the red when you need to be in the green. Right now, these records indicate that you need to borrow a ton of money to keep your business afloat, or you need to file for bankruptcy, scrap the whole thing, and start over.

Here is the thing that boggles your mind. Your books may be so messed up that you are actually in the green and doing fine. You could also actually be in the red, but not as bad as you think you are. If you jump the gun, borrow a ton of money to pay debts you failed to record as paid, or file for bankruptcy because your records say that your business is toast going forward, you can cause yourself and your business far more harm than good.

Your Books Show Fantastic ("Fantasy") Numbers

Wow. So your books reflect tons of money in your account and your pockets. That is good, right? Instead of double-checking your numbers, you decide to use all of that money to expand. Suddenly you are so far in the hole that you could lose your business next month. How did that happen?

Clearly, you have a problem with "fantasy" numbers in that you enter all of your deposits, but seemed to have missed a good chunk of your withdrawals. While this makes you feel fantastic about how successful your business is, it is not real. That is why you end up way into the red and wondering how you got there.

How Accountants Can Help

You know, it does not matter how bad things look right now. Even if you are facing a real bankruptcy, you still have to present your financial books to prove it. That means that an accountant still has to sit down with you, straighten your books out, and provide you with copies. Then you can see just where you went wrong, and not repeat that series of mistakes the second time around. It may even be possible to avoid bankruptcy if you take the time to sit down with an accountant.

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After I started working as an independent contractor, I was astonished with how much my taxes were at the end of the year. I was really frustrated with the entire process, so I began working with an accountant to make things right. They were really interesting to talk to, and before I knew it, things were getting sorted out. This blog is here to help people to know how to understand business taxes and to take care of them the right way the first time. Read more about going through, organizing your finances, and saving for a brighter, happier future.